Recent AMFI data on SIP longevity shows that most investors who started SIPs through direct plans discontinue their investment plans within five years.
The data shows that 91% of the direct plan investors discontinued their SIPs within five years. Of the total Rs.27,021 crore SIP AUM in direct plans, only Rs.2,429 crore has been invested for over five years.
However, in terms of number of folios, 64% or 18.87 lakh SIP accounts opened through direct plans have been active for over five years. A rough calculation shows that each of these SIP folios has Rs.13,000 as on December 2018.
If we delve deeper into the data, majority of the AUM (66%) was discontinued within two years. In fact, 40% of the SIP AUM through direct plans that is Rs.10,714 crore was held for less than a year.
Experts attribute this to lack of guidance. Independent research shows that investors who invested in mutual funds through direct plans redeemed their investments when the markets turned volatile. Without handholding from an advisor who can allay their fears, investors are likely to exit their investments in choppy markets.
On the other hand, most investors who invested in SIPs through regular plans show maturity. They are better equipped to handle the volatility under the guidance of advisors. Experts say that many advisors conduct regular client meetings during volatile markets. Last year, many IFA associations organised IAPs for their clients advising them to stay calm in choppy markets. Thanks to their efforts, 19% that is Rs.46,178 crore of the Rs.2.40 lakh crore regular plan SIP AUM has been invested for over five years.
While we see early redemption in regular plans too, it is significantly lower than direct plans; 30% of the SIP AUM in regular plans has been held for less than 1 year while 53% of the AUM has been held for less than 2 years shows the data.
Overall, 18% of the industry’s SIP AUM has been invested for more than 5 years.
SIP Age-wise Trend for FY 18-19
|
SIP continuing for |
Direct Plan |
Regular Plan |
||
|
AUM (in Rs crore) |
Proportion |
AUM (in Rs crore) |
Proportion |
|
|
> 5 years |
2,429.10 |
9% |
46,177.69 |
19% |
|
> 4 years up to 5 years |
1,193.34 |
4% |
12,565.57 |
5% |
|
> 3 years up to 4 years |
1,997.73 |
7% |
19,431.86 |
8% |
|
> 2 years up to 3 years |
3,771.42 |
14% |
34,867.22 |
15% |
|
> 1 year up to 2 years |
6,915.95 |
26% |
54,845.76 |
23% |
|
< 1 year |
10,713.83 |
40% |
71,905.25 |
30% |
|
Total |
27,021.37 |
100% |
2,39,793.35 |
100% |
